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9 AN ACT relating to severance taxation; amending K.S.A. 79-4225 and
10 K.S.A. 1996 Supp. 77-549 and 79-4216 and repealing the existing
11 sections.
12
13 Be it enacted by the Legislature of the State of Kansas:
14 Section 1. K.S.A. 1996 Supp. 79-4216 is hereby amended to read as
15 follows: 79-4216. As used in this act, unless the context clearly requires
16 otherwise, the following words and phrases shall have the meanings as-
17 cribed to them herein:
18 (a) ``Barrel'' for oil measurement means a barrel of 42 U.S. gallons of
19 231 cubic inches per gallon, computed at a temperature of 60 degrees
20 Fahrenheit.
21 (b) ``Director'' means the director of taxation.
22 (c) ``Gas'' means natural gas taken from below the surface of the earth
23 or water in this state, regardless of whether from a gas well or from a well
24 also productive of oil or any other product.
25 (d) ``Gross value'' means the sale price of oil or gas at the time of
26 removal of the oil or gas from the lease or production unit and if oil or
27 gas is exchanged for something other than cash, or if no sale occurs at
28 the time of removal or if the director determines that the relationship
29 between the buyer and the seller is such that the consideration paid, if
30 any, is not indicative of the true value or market price, then the director
31 shall determine the value of the oil or gas subject to tax, based on the
32 cash price paid to one or more producers for the oil or gas or based on
33 the cash price paid to producers for like quality oil or gas in the vicinity
34 of the lease or production unit at the time of the removal of the oil or
35 gas from the lease or production unit. Notwithstanding the foregoing, if
36 no sale of gas occurs at the time of removal and such gas is not stored,
37 then the gross value of gas for the purpose of taxation under this act shall
38 be the price for which such gas is sold at the time of sale if such sale is
39 not between related parties.
40 (e) ``Oil'' means petroleum, or other crude oil, condensate, casing-
41 head gasoline, or other mineral oil which is severed or withdrawn from
42 below the surface of the soil or water in this state.
43 (f) ``Operator'' means the person primarily responsible for the man-
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1 agement and operation of coal, oil or gas productions from a lease, pro-
2 duction unit or mine.
3 (g) ``Person'' means any natural person, firm, copartnership, joint
4 venture, association, corporation, estate, trust or any other group or com-
5 bination acting as a unit, and the plural as well as the singular number.
6 (h) ``Producer'' means any person owning, controlling, managing or
7 leasing any coal, oil or gas property or oil or gas well or coal or salt mine,
8 and any person who severs in any manner any coal, oil or gas in this state,
9 and shall include any person owning any direct and beneficial interest in
10 any coal, oil or gas produced, whether severed by such person or some
11 other person on their behalf, either by lease, contract or otherwise, in-
12 cluding a royalty owner.
13 (i) ``Remove'' or ``removal'' means the physical transportation of coal,
14 oil or gas off of the lease or production unit or from the mine where
15 severed; and if the manufacture or conversion of crude oil or natural gas
16 into refined products occurs on the premises where severed, oil or gas
17 shall be deemed to have been removed on the date such manufacture or
18 conversion begins.
19 (j) ``Secretary'' means the secretary of revenue.
20 (k) ``Severed'' or ``severing'' means: (1) The production of oil through
21 extraction or withdrawal of the same from below the surface of the soil
22 or water, whether such extraction or withdrawal shall be by natural flow,
23 mechanical flow, forced flow, pumping or any other means employed to
24 get the oil from below the surface of the soil or water and shall include
25 the withdrawal by any means whatsoever of oil upon which the tax has
26 not been paid, from any surface reservoir, natural or artificial, or from a
27 water surface; (2) the production of gas through the extraction or with-
28 drawal of the same by any means whatsoever, from below the surface of
29 the earth or water; and (3) the physical removal of coal from the earth.
30 (l) ``Taxpayer'' means any person liable for the taxes imposed by this
31 act.
32 (m) ``Disruption of production'' means, in the case of oil, a continuous
33 24-hour period during which a well is not producing. Circulating and
34 missed production days shall be considered production days if the oper-
35 ator can demonstrate that any lost production is subsequently recovered
36 during a later production day. In the case of gas, a continuous one-hour
37 period during which a well is not open to the pipeline shall be deemed
38 to be a disruption of production. Missed production hours shall be con-
39 sidered production hours if the operator can demonstrate that any lost
40 production is subsequently recovered during later production hours.
41 Sec. 2. K.S.A. 79-4225 is hereby amended to read as follows: 79-
42 4225. (a) If any taxes imposed under this act and determined and assessed
43 by the director are unpaid: (1) Not due to negligence or to intentional
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1 disregard of this act or rules and regulations promulgated by the secretary,
2 interest on such taxes shall be added at the rate per month prescribed by
3 subsection (a) of K.S.A. 79-2968, and amendments thereto, from the date
4 the tax was due until paid; (2) due to negligence or to intentional disregard
5 of this act or rules and regulations promulgated by the secretary, but
6 without intent to defraud, a penalty of 10% of the amount of such taxes
7 shall be added, together with interest at the rate per month prescribed
8 by subsection (a) of K.S.A. 79-2968, and amendments thereto, from the
9 date the tax was due until paid; (3) due to fraud with intent to evade the
10 tax imposed by this act, there shall be added thereto a penalty of 50% of
11 the amount of such tax, together with interest at the rate per month
12 prescribed by subsection (a) of K.S.A. 79-2968, and amendments thereto,
13 from the date the tax was due until paid.
14 (b) If any person fails or refuses to make any return, when required
15 to do so under the provisions of this act, such person shall be subject to
16 a penalty of $25 per day for each return which such person fails or refuses
17 to file.
18 (c) Whenever, in the judgment of the director, the failure of any
19 person to comply with the provisions of subsection (a)(1), (a)(2), and (b)
20 of this section, was due to reasonable cause, the director may, in the
21 exercise of discretion, waive or reduce any of the penalties upon making
22 a record of the reason therefor.
23 (d) In addition to all other penalties herein provided, any person who
24 fails to make a return, or to pay any tax herein provided, or who makes a
25 false or fraudulent return, or fails to keep any books or records prescribed
26 by this act, or who willfully violates any rules and regulations promulgated
27 by the secretary for the enforcement and administration of this act, or
28 who aids and abets another in attempting to evade the payment of any
29 tax imposed by this act, or who violates any other provisions of this act,
30 shall, upon conviction thereof, be guilty of a class C misdemeanor.
31 (e) The director of taxation shall examine all returns filed under the
32 provision of this act, and shall issue notices and final determinations of
33 tax liability hereunder in the manner prescribed by K.S.A. 79-3226, and
34 amendments thereto, relating to income taxes.
35 Sec. 3. K.S.A. 1996 Supp. 77-549 is hereby amended to read as fol-
36 lows: 77-549. (a) The filing of a return with the director of taxation under
37 article 15, 32, 33, 34, 36, 37, 41, 42 or 47 of chapter 79 of the Kansas
38 Statutes Annotated, and amendments thereto, shall not be deemed an
39 application for an order under the Kansas administrative procedure act.
40 (b) A determination by the division of taxation or the audit services
41 bureau of the department of revenue concerning tax liability under article
42 15, 32, 33, 34, 36, 37, 41, 42 or 47 of chapter 79 of the Kansas Statutes
43 Annotated, and amendments thereto, which is made prior to the oppor-
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1 tunity for a hearing before the director of taxation on such tax liability,
2 shall not require an adjudicative proceeding under the Kansas adminis-
3 trative procedure act.
4 (c) For purposes of the Kansas administrative procedure act, the di-
5 rector of taxation shall be deemed the agency head in regard to orders
6 rendered by the director under chapter 79 of the Kansas Statutes An-
7 notated, and amendments thereto.
8 (d) Final orders of the director of taxation pursuant to K.S.A. 77-526,
9 and amendments thereto, shall be rendered in writing and served within
10 120 days after conclusion of the hearing or after submission of proposed
11 findings in accordance with subsection (f) of K.S.A. 77-526, and amend-
12 ments thereto, unless this period is waived or extended with the written
13 consent of all parties or for good cause shown. If extended for good cause,
14 such good cause shall be set forth in writing on or before the expiration
15 of the 120 days.
16 Sec. 4. K.S.A. 79-4225 and K.S.A. 1996 Supp. 77-549 and 79-4216
17 are hereby repealed.
18 Sec. 5. This act shall take effect and be in force from and after its
19 publication in the statute book.